Abstract:
The use of credit and debit card has been increased day by day. So the financial fraud or
the fraudulent transaction has also increased day by day in today’s world because of
development of modern technology. With the help of these cards we can make both online
and offline payment easily. For online transaction it uses virtual card and for offline
transaction it uses physical card. In today’s world, credit and debit card provides cashless
shopping at every shop. In this fraud detection system (FDS), when a fraudulent transaction
is going to be done, it will be detected by this system. A fraud can be detected using Hidden
Markov Model (HMM) during transaction. In this project, the sequence of operations in
credit card transaction processing system using a Hidden Markov Model and show how it
can be used for the detection of fraud. An HMM is initially trained with the normal
behavior of a cardholder. If an incoming credit card transaction is not accepted by the
trained HMM with sufficiently high probability, it is considered to be fraudulent. At the
same time, we try to ensure that genuine transactions are not rejected.
